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[2018] ZANCHC 76
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Van Zyl v FJ Van Zyl En Seuns Boerdery (Pty) Ltd and Another (377/14) [2018] ZANCHC 76 (26 October 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE DIVISION, KIMBERLEY)
Case
No: 377/14
In the
matter between:-
JAN
JACOB DE CLERCQ VAN
ZYL Applicant
and
FJ VAN
ZYL EN SEUNS BOERDERY (PTY) LTD
(Registration
Number:
1994/003008/07)
1
st
Respondent
FREDERIK
JACOBUS VAN
ZYL 2
nd
Respondent
Coram:
Lever AJ
JUDGMENT
Lever
AJ
1.
In the present application, applicant in its
Notice of Motion dated 11 March 2014 sought in part A thereof: the
appointment of Pieter
Hendrik Strydom (Strydom) as referee to deal
with the deadlock that existed between the shareholders and directors
of the first
respondent; that Strydom be vested with the powers set
out in annexure “X1” to the said Notice of Motion; that
Strydom
report back within a specified period with a recommendation
as to whether first respondent should be placed under business
rescue,
be wound-up or whether another mechanism should be used to
deal with the deadlock
alternatively
distribute the assets of the first respondent (presumably to the
applicant and second respondent); and that Part B of the Notice
of
Motion be postponed for consideration on the date that Srydom’s
report came before the court for consideration.
2.
In part B of the said Notice of Motion, applicant
sought that: the first respondent be placed under business rescue;
Strydom be
appointed as the business rescue practitioner; that the
costs of the application be costs in the business rescue.
Alternatively
,
that the first respondent be wound-up and the costs of the
application be costs in the winding-up.
3.
The second respondent agreed with the approach
that a referee be appointed to make progress in the resolution of the
disputes between
himself and the applicant, his brother, that arose
from the estate of their late father and the business of the first
respondent.
However, second respondent proposed that as applicant had
nominated Strydom to be a referee that he should also nominate a
co-referee
and that these joint referees be appointed by agreement.
This was agreed to and an order was taken by consent that the said
referees
be appointed with certain defined obligations and powers.
4.
On the 23 May 2014 my sister, Madam Justice
Pakati J made an order to the effect that Stydom, applicant’s
nominee and Tony
Wright (Wright), second respondent’s nominee
were jointly appointed as the referees in terms of s38 of the
Superior Courts
Act (the Act).
5.
The said court Order defined its objective as:
“…to enable the resolution of such disputes, and then to
divide and
distribute the assets of the First Respondent, after
collection of all debts and payment of all liabilities, between the
Applicant
and the Second Respondent in the most financially efficient
manner;”.
6.
The said Order went on to state that the joint
referees shall have the powers conferred by s38 of the Act, the
powers conferred
by such Order as well as the powers conferred by
annexure “X1” to such Order.
7.
The said Order then provided for the manner in
which the referees were to report back to the court.
8.
Then the Order provided:
“
5
The referees are, specifically, to report and make recommendations in
respect of the following:
5.1
A suitable mechanism by means of which the deadlock that subsists
between the shareholders and directors of the First Respondent
may be
justly and equitably be resolved,
alternatively
the net assets
of the First Respondent may be justly and equitably distributed so as
to resolve the disputes referred to in paragraph
1 above;
5.2
Whether the First Respondent should be placed in business rescue or
not;
5.3
Whether it is just and equitable that the First Respondent is
wound-up or not.”
9.
The said Order then dealt with certain procedures
required: to serve such order on the joint referees; in the event
that the referees
were unable to determine any issue, after
deliberation, they were entitled to appoint an appropriate expert who
would provide a
final ruling on such issue which was binding on the
referees; if it was necessary to apply to court for further
direction; and
costs.”
10.
Annexure “X1” to the said Order
provided that:
“
The
referees shall, without limiting the generality of their powers to
investigate the affairs of the First Respondent
in
whatever manner they deem fit, be entitled to-
1.
determine the assets and liabilities of the First
Respondent;
2.
require the Applicant and the Second Respondent
to provide a detailed account of-
2.1.
the assets of the First Respondent which may be
in their possession or which they may have dealt with; and,
2.2.
any claims which they may have against the First
Respondent or which the First Respondent may have against them;
3.
make all investigations necessary and in
particular to obtain from the Applicant, the First Respondent and the
Second Respondent
all information with regard to the assets and
liabilities of the First Respondent;
4.
obtain information regarding the financial
affairs of the First Respondent from bank managers and/or managers of
any other financial
institution with regard to each and every asset
and liability of the First Respondent;
5.
obtain information from the auditors or any other
person who may have knowledge of the financial affairs of any related
companies,
close corporations, trusts or businesses of the First
Respondent, and in respect of which any of its shareholders has or
may have
had an interest in, directly or indirectly, which may relate
to the assets and/or liabilities of the First Respondent;
6.
obtain copies of the financial statements of the
First Respondent and all companies, close corporations, trusts or
businesses in
which the shareholders of the First Respondent directly
or indirectly may have an interest,
alternatively
may have had an interest;
7.
make recommendations regarding the payment or
delivery by shareholders of any such portion of the assets of the
First Respondent
which they may have dealt with;
8.
make recommendations regarding the delivery
and/or transfer by the shareholders of any assets of the First
Respondent which may
be in their possession and/or held by them;
9.
take all steps they deem necessary to comply with
their mandate herein;
10.
to the extent that the funds are available to do
so, discharge the debts and liabilities of the First Respondent;
11.
cause the financial records of the First
Respondent to be brought up to date;
12.
cause a valuation to be made of the company
and/or any of its assets;
13.
make recommendations to the Applicant and the
Second Respondent regarding the resolution of the disputes prior to
the presentation
of their report to the Honourable Court.”
11.
The referees were appointed under the provisions
of s38 of the Act. The said s38 has replaced s19
bis
of the Supreme Court Act of 1959 (the repealed Act). Despite minor
differences in wording and form, s38 of the Act and s19
bis
of the repealed Act are in substance to the same effect. Accordingly,
any prior judgments relating to the application of s19
bis
of the repealed Act, depending upon the jurisdiction of the court
that handed down such judgment down and whether or not any of
the
minor differences in wording or form being material or not, would
either be persuasive authority or binding on this court.
12.
The said s38 of the Act provides:
“
38(1)
The Constitutional Court and, in any civil proceedings, any Division
may, with the consent of the parties, refer-
(a)
any matter which requires extensive examination
of documents or a scientific, technical or local investigation which
in the opinion
of the court cannot be conveniently conducted by it;
or
(b)
any matter which relates wholly or in part to
accounts; or
(c)
any other matter arising in such proceedings,
for
enquiry and report to a referee appointed by the parties, and the
court may adopt the report of any such referee, either wholly
or in
part, and either with or without modifications, or may remit such
report for further enquiry or report or consideration by
such
referee, or make such other order in regard thereto as may be
necessary or desirable.
(2)
Any such report or any part thereof which is adopted by the court,
whether with or without modifications, shall have the effect
as if it
were a finding by the court in the proceedings in question.
(3)
…”
13.
From the founding affidavit, the answering
affidavit and the replying affidavit filed respectively by the
applicant and the second
respondent, the disputes between them appear
to be far ranging. It is also evident that applicant and second
respondent are unable
to resolve these disputes.
14.
These disputes have their origins in a farming
enterprise originally conducted by second respondent and his late
father, which applicant
later joined. This family farming enterprise
was originally conducted by way of a partnership and later in 1995
the first respondent
was incorporated.
15.
Their late father, the applicant and the second
respondent were all directors of the first respondent and they were
also the only
shareholders in the first respondent. After the
distribution in terms of their late father’s will applicant and
second respondent
each own 50% of the shares in first respondent.
This much is common cause between the applicant and the second
respondent.
16.
From that point, applicant’s and first
respondent’s versions part ways. Applicant contends that the
first respondent
took over the assets and operations of the
partnership. That these assets included two farms in Namibia
originally registered in
the name of second respondent. The Namibian
farms are now registered in the names of separate close corporations
in which second
respondent’s wife, who is a Namibian citizen
has a 51% interest in each of them. The remaining members interests
in said
close corporations is owned by the second respondent. The
reason for the Namibian farms being transferred from second
respondent
to the relevant close corporations is not directly
relevant to the present matter.
17.
Applicant also contends that the livestock of the
said farming enterprise belongs to the first respondent. He also
contends that
certain farms registered in his own name belong to the
first respondent. Applicant further contends that the partnership
ceased
to exist after the incorporation of the first respondent.
18.
By contrast second respondent contends that the
Namibian farms do not belong to the first respondent. Second
respondent gave a detailed
explanation as to how he came to acquire
the Namibian farms. He explained one such farm was bought with the
assistance of a loan
from the farming enterprise, which was debited
against his loan account. He also explained that the other Namibian
farm was bought
with a loan from a financial institution, which was
repaid by the first respondent but again such loan repayments were
debited
to his loan account with the first respondent.
19.
Second respondent contends that whilst the first
respondent was incorporated and took over the partnership bank
account and that
all the farming enterprises income was paid into
that account and its expenses were paid from that account, two
partnerships between
his late father, his brother, being the
applicant and himself, continued to exist. On the second respondent’s
version the
livestock continued to be owned by these two
partnerships. One of these partnerships carried on business in
Namibia and the other
one carried on business in South Africa.
20.
The applicant and the first respondent agree that
their father died on the 24 January 2004. Second respondent’s
position is
that both farming partnerships dissolved on the death of
their father. As set out above, applicant’s position is that
there
was only one partnership which came to an end on the
incorporation of the first respondent. On this set of facts, it is
evident
that no new partnership was constituted between applicant and
second respondent after their father’s death. Neither applicant
nor second respondent contends that a new partnership was formed.
Second respondent contends that until their father’s death
the
Namibian and South African partnerships existed and owned the
livestock of their farming enterprise. Second respondent further
contends that upon the death of their father the partnership assets
being the livestock were divided in terms of the will of their
late
father.
21.
Applicant and second respondent also dispute if
and when they stopped farming together for the benefit of the first
respondent and
the effect of such conduct.
22.
From the date of their late father’s death,
there is no evidence that there was ever a meeting of the first
respondent’s
Board of Directors. Since that date, there is no
evidence that the said directors ever adopted a resolution to conduct
the affairs
of the first respondent. Nor is there any evidence that
there was ever a meeting of the first respondent’s shareholders
from
that date. In these circumstances, it is clear that there was
and exists a deadlock between the applicant and the second respondent
in running the affairs of the first respondent.
23.
Depending upon how the above disputes are
resolved would affect the division of the first respondent’s
assets between the
applicant and second respondent as well as their
respective loan accounts in the first respondent. The said loan
account is also
an area of dispute between the applicant and the
second respondent.
24.
This is the climate in which the joint referees
were appointed.
25.
On the 15 December 2015 the joint referees,
nominated respectively by the applicant and second respondent, filed
a consensus report.
26.
The referees, in their report defined the
disputes between the applicant on the one hand and the second
respondent on the other
as follows:
“
22.1
Farming operations conducted by the first
respondent and partnerships:
Jan (applicant)
and Fred (second respondent) are disputing whether the partnership
and company (first respondent) became one and
traded as such. They
are also disputing the date on which farming operations ceased in the
first respondent.
22.2
Ownership of the livestock on the farms:
According to Fred,
the partnerships continued to hold the livestock after the formation
of the first respondent. Jan disputes this
and states that the first
respondent owned the livestock.
22.3
The ownership of the Namibian farms:
According to Jan, the
Namibian farms are the assets of the first respondent and should not
have been transferred into Fred’s
name. Fred states that the
farms were purchased by him in his personal capacity.
22.4
The value of shareholder loans:
Fred alleges that he invested substantial sums of money in the first
respondent, which resulted in a large loan owed by the first
respondent to Fred.”
27.
It is evident that the referees conducted
extensive investigations in respect of the disputes set out above.
After concluding that
applicant and second respondent have nothing in
common and that they do not believe there will ever be a
reconciliation between
the brothers, recommended that the court
should divide the assets between the two brothers in an equitable
manner.
28.
The referees after considering the versions of
the applicant and the second respondent, the evidence provided by the
attorney who
finalised the estate of the late father, who is in fact
a cousin of both the applicant and second respondent, the documentary
evidence
available and the evidence of the respective loan accounts
in the partnership and subsequently in the first respondent,
concluded
that the Namibian farms belonged to the second respondent.
29.
The referees were unable to make a determination
as to whether the livestock vested in the partnerships or in the
first respondent.
In the light of this they calculated the
applicant’s and second respondent’s loan account with the
first respondent
to cater for each position. In other words, the
referees calculated the said loan accounts on the assumption that the
livestock
belonged to the partnership and then recalculated the said
loan accounts on the assumption that the livestock belonged to the
first
respondent.
30.
In assessing the loan accounts of the applicant
and the second respondent in the first respondent, the referees set
out how they
went about this exercise. They had access to the
financial records of the partnership and subsequently those of the
first respondent.
They also met with the auditors of the first
respondent. Both the applicant and the second respondent made
submissions to the joint
referees which were considered by the joint
referees in calculating the said loan accounts based on the
alternative scenarios.
31.
In the final analysis the referees provided the
following figures for the respective loan accounts in the two
scenarios relating
to the ownership of the livestock set out above.
These are:
31.1.
On the basis that the first respondent does not
own the livestock:
31.1.1.
An amount of R3,652,020.80 (three million six
hundred and fifty-two thousand and twenty rand and eighty cents) owed
to the first
respondent by applicant (Jan); and
31.1.2.
An amount of R4,175,386.22 (four million one
hundred and seventy-five thousand three hundred and eighty-six rand
and twenty-two
cents) owed by the first respondent (the company) to
the second respondent (Fred).
31.2.
On the basis that first respondent does own the
livestock:
31.2.1.
An amount of R7,260,118.22 (seven million two
hundred and sixty thousand one hundred and eighteen rand and
twenty-two cents) owed
to the first respondent by applicant (Jan);
and
31.2.2.
An amount of R567,288.79 (five hundred and
sixty-seven thousand rand two hundred and eighty-eight rand and
seventy-nine cents) owed
by the first respondent to the second
respondent.
32.
In 2007 the applicant sent a message to the
second respondent indicating that he wanted them to go their own
separate ways. At the
time the first respondent had an overdraft with
the bank. It seems that the second respondent approached the bank,
who because
of the overdraft of the first respondent and the fact
that first respondent’s farms were mortgaged as security to the
bank
for such overdraft, would not allow the second respondent to
open a bank account in his own name for his own farming enterprise.
33.
The arrangement that second respondent made with
first respondent’s bankers was that a new account will be
opened in the first
respondents name. In other words, two accounts
were operated in the name of the first respondent with the relevant
bank. The bank
divided the then outstanding amount on the overdraft
between the applicant and the second respondent and each one of them
was responsible
for half the liabilities of the first respondent at
the time that the second bank account was opened as set out above.
The applicant
would run the original bank account in first
respondent’s name and be responsible for half of the overdraft
owed to the bank
and second respondent would run the new bank account
in first respondent’s name and be responsible for the other
half of
the overdraft owed by the first respondent to the relevant
bank.
34.
From his conduct, it is clear that the applicant
acquiesced in this solution. The adoption of this solution showed at
minimum that
none of the bank, applicant or second respondent had any
respect for the separate corporate identity of the first respondent.
Clearly,
each of them were pursuing their own agenda and interests.
In my view this is a significant fact in seeking a just and equitable
solution to the difficulties between the applicant and second
respondent.
35.
The second respondent paid off his share of the
first respondent’s liabilities and because of a threatened
liquidation of
the first respondent by the bank, second respondent
made arrangements with the bank to pay off applicant’s share of
such
liability as well. In the final analysis second respondent
repaid the entire liability of the first respondent to the bank.
Second
respondent has completed paying off this liability of first
respondent as well as a liability of first respondent to the Land
Bank.
This is one of the reasons why there is such a large disparity
between the respective loan accounts.
36.
The referees could make no finding as to whether
the partnership/s owned the livestock and whether or not the
applicant and second
respondent continued trading for the benefit of
the first respondent.
37.
On the 21 April 2016 the second respondent filed
an affidavit dealing with the said referees’ report. With
certain reservations
second respondent moved in terms of s38(1) of
the Act for the court to adopt such report. In such affidavit, the
second respondent
made certain suggestions regarding the
implementation of the referees’ recommendations contained in
the said report.
38.
On the 23 June 2016, the applicant’s then
attorneys of record withdrew. The matter was set down on the opposed
roll for hearing
on the 12 August 2016. A week before the hearing on
the 5 August 2016 Messrs Van de Wall Inc filed a Notice of
Appointment as the
applicant’s new attorneys of record in the
matter. Applicant then on the same date, filed a poorly drafted,
lengthy, repetitious
and confused affidavit in which he took issue
with the findings of the referees as set out in their report.
Applicant also accused
the referees of being biased.
39.
On the 12 August 2016, the matter came before me
and I impressed upon the legal representatives of both the applicant
and the second
respondent who appeared in the matter at that time,
the desirability of the parties engaging each other in an attempt to
find a
mutually acceptable way forward in the matter.
40.
In the result, I made the following Order by
agreement on the 12 August 2016:
“
1
The matter is remitted to the joint referees for the purpose of
further enquiry and report as set forth below.
2
The affidavit of Applicant dated 5 August 2016 (“the
affidavit”) is referred to the joint referees.
3
Second Respondent shall be entitled to present written submissions to
the joint referees as regards the content of the affidavit.
4
The referees are authorised and requested:
4.1
To consider:
4.1.1
The affidavit, as read with the submissions referred to in paragraph
3 above.
4.1.2
The proposal captioned: “IMPLEMENTATION OF THE REPORT” in
paragraphs 14 to 53 of the affidavit of Second Respondent
dated 29
March 2016.
4.1.3
To engage with the parties as regards the above, to the extent that
they deem it necessary.
4.2
To file a further report (“the Further Report”) in regard
to their findings and recommendations on these issues,
if possible by
the end of September 2016.
5
Upon receipt of the Further Report, the parties are directed within
two weeks to exchange detailed lists of issues (if any) in
the Report
and the Further Report with which they take issue. Such list shall
(be) provided with the level of particularity which
characterises
further particulars for trial, and shall isolate specific items of
dispute (with reference, where necessary, to individual
entries to
the schedules to the Report) and not broad averments to areas of
dispute.
6
The matter is postponed
sine die
, to be enrolled on a date to
be agreed between the legal teams and the Honourable Mr Justice
Lever, and – in the absence
of agreement – upon a date to
be determined by him.
7
The above Honourable Court shall determine, upon the resumption of
the matter:
7.1
Which aspects of the Report and the Further Report (if any) are
adopted;
7.2
Which issues (if any) are referred to trial, and on what terms.
8
Applicant shall make a contribution of R50 000.00 to Second
Respondent’s Costs, and make payment thereof by no later than
31 October 2016.”
41.
On the 9 November 2017 the second respondent’s
attorney served a Notice of Set Down on the Applicant’s then
attorney,
being Messrs Van De Wall Inc, setting the matter down for
the 9 February 2018. On the 28 November 2017 Messrs Van De Wall Inc
withdrew
as the applicant’s attorney. On the 9 February 2018,
when the matter was called, the applicant was represented by Mr
Fletcher
of Fletchers Attorneys. Mr Fletcher informed me that he had
only been briefed a few days before the hearing to move an
application
for a postponement. The application for a postponement
was moved and debated before me. I considered such application and in
an
ex tempore
judgment
dismissed such application. My reasons for doing so are not pertinent
to the present judgment.
42.
After the application was dismissed Mr Fletcher,
his mandate having terminated, asked to be excused. Mr Fletcher was
excused and
the applicant who was in court took over the matter in
person.
43.
The applicant had not complied with either
paragraph 5 or 8 of the Order of the 12 August 2016, which is quoted
above. The applicant
when he addressed the court did not indicate
that he was not aware of the said Order on the contrary he asked to
be excused for
his failure to pay the contribution to the costs of
the second respondent contemplated in paragraph 8 of the said Order,
because
of a dispute regarding fees with his former attorney. The
said Order was made by consent. Applicant was represented by both
counsel
and an attorney at the time the said Order was made. In the
circumstances, applicant was clearly aware of the said Order and its
terms.
44.
The second respondent also filed an affidavit by
an accountant on the 16 December 2017, dealing with the consequences
of the livestock
being owned by either the partnership at the time of
the death of the father of the applicant and second respondent. The
said accountant
also dealt with the practical proposals made by the
second respondent and shows how they will achieve a fair and
equitable separation
of the business of the second respondent from
both the applicant and the first respondent. This affidavit was
served on the applicant
by way of Sheriff. The applicant did not
respond to this affidavit either.
45.
The applicant in arguing his case tried to
convince me that there were disputes of fact and that consequently I
should not implement
the referees report. He went about this by
reading lengthy extracts of the affidavit he filed in response to the
referees’
main report. The said affidavit was both dated and
filed on the 5 August 2016. The applicant then asked me in the
alternative to
wind-up the first respondent.
46.
I assume that in the circumstances the applicant
was asking me to not implement the referees report and supplementary
report and
that I should refer the matter to trial and in the
alternative if I was not disposed to refer the matter to trial I
should order
that the first respondent be wound-up.
47.
Mr Kirk-Cohen SC, who appeared for the second
respondent, referred me to the case of
Wright
v Wright
[1]
in regard to the role and function of a referee. This case was
decided under the provisions of s19
bis
of the repealed Act. After setting out the history and development of
s19
bis
Kathree-Setiloane J deals with the nature of a referees’ report
and findings on fact in particular in regard to when such
findings
may be set aside or departed from. In this regard, Kathree-Setiloane
J stated:
“
[15]
It is significant, in this regard, that an arbitrator, as
contemplated in the Arbitration Act, fulfils a quasi-judicial
function
whereas a valuator is required only to make a finding.
Similarly, a referee, appointed in terms s19bis of the Act, is
required
only to make a factual finding. A referee, unlike an
arbitrator, does not exercise a judicial or quasi-judicial function.
Accordingly,
the grounds upon which the award of an arbitrator and
the report of a referee may be challenged differ significantly. In
this regard,
a report of a referee as contemplated in s19bis may be
set aside if his or her judgment is exercised unreasonably,
irregularly
or wrongly, whilst the award of an arbitrator, appointed
in terms of the Arbitration Act, may only be set aside on the limited
basis as provided for in s 33 of the Arbitration Act, which includes
that an arbitrator has misconducted himself in relation to
his duties
as an arbitrator; or has committed a gross irregularity in the
conduct of the proceedings; or has exceeded his powers;
or that the
award was improperly attained.
[16]
The test applied for rectification of an expert valuator's report,
which is akin to that of a referee's report, accords with
the test
applied in Estate Young and Chaffer, albeit that the jury system has
been discontinued in South Africa. A referee's report,
as
contemplated in s19bis of the Act, is a finding of an expert
appointed by the court, to investigate and provide a report of
his or
her findings to the court on questions of fact. A court should,
therefore, be 'extremely slow' to interfere with these findings,
unless it can be shown that the findings are so unreasonable,
irregular or wrong, so as to lead to a patently inequitable result.
…
[18]
The court is afforded a wide discretion in terms of s19bis of the
Act. It may adopt any one of the courses provided for in
the section:
it may adopt the report of the referee either wholly or in part, and
either with or without modifications, or it may
remit the report for
further inquiry or report or consideration by the referee, or make
such other order, in regard to the findings
of the referee, as may be
necessary or desirable. The power of the court in the latter instance
would, in my view, include the
power to set aside the report if it is
patently unreasonable, irregular or incorrect, or to refer the report
or aspects thereof
to oral evidence or trial, if a real dispute of
fact, as envisaged in Room Hire Co (Pty)Ltd v Jeppe Street Mansions
(Pty) Ltd
1949 (3) SA 1155
(T) at 1163, can be shown to exist.
The court may, therefore, adopt any one of the said courses it deems
'necessary or desirable'.
The court may, however, only refer the
question of whether to adopt the report or not to oral evidence or
trial, if a real dispute
of fact is shown to exist in relation to
findings of the referee.”
[2]
48.
I have established that Wright’s case has
been confirmed by the Supreme Court of Appeal on appeal
[3]
.
To the extent that Wright’s case deals with the nature of a
referees report, the discretion a court has in adopting its
recommendations and the circumstances when such report can be set
aside, for the reasons set out above and in the circumstances
of this
case, I consider myself bound by such authority.
49.
Mr Kirk-Cohen then submitted that the applicant
has not properly placed a real dispute of fact before me. He referred
to the Order
of 12 August 2016. More specifically to paragraph 5 of
such order. Mr Kirk-Cohen submitted, applicant as
dominus
litus
had taken no steps to bring his
application to finality. Applicant had not set out the areas of
dispute in accordance with paragraph
5 of the said Order. Whilst I
believe Mr Kirk-Cohen is correct in this regard, I do not intend to
decide the matter on this basis.
50.
I shall decide the matter on the disputes raised
on the papers at the date of the hearing of this matter that are in
my opinion
material to the outcome. If I believe any dispute raised
on the papers is not material to the outcome, it will not enjoy
consideration.
To do otherwise would simply make this judgment
unmanageable.
51.
In my view, I could only refer the matter to
trial if I could find that the applicant has properly put before the
court real disputes
of fact. Similarly, I am of the view that I can
only order the winding-up of the first respondent if I can reasonably
form the
opinion that there is no other fair and equitable manner to
resolve the disputes between the applicant and the second respondent.
52.
Dealing with the four areas of dispute identified
by the referees and quoted above, I shall deal with such issues and
the disputes
around them in the following order: firstly, the
ownership of the Namibian properties; secondly, whether the farming
operations
included the partnerships contended by the second
respondent and the issue of whether the applicant and second
respondent farmed
for the benefit of the first respondent company or
whether they farmed for their own account after the death of their
father; thirdly,
the ownership of the livestock; and finally, the
value of the respective loan accounts.
53.
In respect of the ownership of the Namibian
properties, the referees have made a finding that such properties are
not assets of
the first respondent. In response to this applicant has
referred to an application for finance from the Land Bank to purchase
the
farm De Brak where apparently, the Namibian properties are listed
as an asset of the first respondent. Applicant has also referred
to a
letter from the first respondent’s auditors motivating that the
first respondent should buy all of the assets of the
then
partnership.
54.
Considering the Land Bank application first, the
Namibian Properties are listed on such application, but they are
listed in a section
that relates to “own properties or spouses’
properties which are not being tendered for purposes of security”.
In my view the Namibian properties are not listed on such form to
show that they are owned by the first respondent company.
55.
Turning now to the letter from the auditors, in
the absence of a resolution from the first respondent company or even
an allegation
that such resolution has been taken, this letter merely
evidences a recommendation from the auditors. The applicant contends
that
such letter is evidence that the first respondent bought the
said Namibian properties. For the reason already set out in this
paragraph,
I cannot support applicant’s contention in this
regard.
56.
In my view neither the Land Bank application nor
the letter from the auditor creates a real dispute of fact. The
referees have found
that the payments the farming partnership made
towards the purchase of such property were properly debited to the
second respondent’s
loan account, first with the partnership
and later with the first respondent company. In these circumstances,
there is no real
dispute of fact on this question which I would be
justified in referring to trial.
57.
Turning now to the second area of dispute being,
whether the relevant farming operations included the South African
and Namibian
partnerships and when the applicant and the second
respondent stopped farming for the benefit of the first respondent.
The referees
found that both the Namibian and the South African
partnerships were in existence at the time of the death of applicant
and second
respondent’s father. The applicant’s efforts
were focused on who owned the livestock. In that context the
applicant
referred to different statements made to banks, SARS and
the Master in relation to who owned the livestock.
58.
It seems that the deceased father, the applicant
and the second respondent were not averse to making inconsistent
statements depending
upon the circumstances and the context. However,
this in itself does not mean that the relevant partnerships did not
exist. In
the context of farming in a different country subject to a
different tax regime, it would make perfect sense to have a Namibian
partnership or other Namibian entity to conduct business in Namibia.
59.
The Namibian Partnership is the only such entity
referred to. It is further corroborated by certain of the financial
statements
referred to by the referees. The South African partnership
features in the will of the applicant’s and second respondent’s
late father. It also features in the relevant Liquidation and
Distribution account lodged to finalise the estate as well as
receipts
signed by both applicant and second respondent acknowledging
receipt of their share of such partnership in respect of the late
father’s will. Such information that was placed before this
court by the applicant does not constitute a real dispute of fact
in
the sense necessary for me to refer the matter to trial.
60.
In considering when the farming operations ceased
in the first respondent. It is evident from the date of their
father’s death
that the applicant and second respondent were
trying to extricate themselves from the relationship both seemed to
regard themselves
as having been forced into in the farming business.
In his answering affidavit at paragraph 59 thereof, the second
respondent states:
“
From
2004, we had farmed separately from one another. The only thing that
linked us to each other and to the company was the fact
that we still
both used the company account at Standard Bank, and occupied farms
owned by the company.”
61.
To this in paragraph 113 of his reply applicant
responded candidly: “The content hereof is admitted.”
62.
The applicant in his response to the referees’
main report takes a more legalistic approach and points out that the
assets
belonged to the company. On applicant’s version he was
referring to the first respondent’s overdraft facility, the
first respondent’s farms and the livestock. The ownership of
the livestock question is a dispute where the referees declined
to
make a finding. This question will be dealt with presently.
63.
Whilst the applicant is correct at least insofar
as the overdraft facility and the relevant properties and certain
movables are
concerned. In the context it would be artificial to look
only at this. As already mention from the death of their father
applicant
and second respondent had been trying to sever the links
between them. As far as the first respondent is concerned, from the
date
of their father’s death, there is no evidence of a single
meeting of the Board of Directors or a resolution adopted by the
directors. Similarly, there is no evidence of an annual general
meeting or any other shareholders meeting.
64.
It must be remembered that both applicant and
second respondent conducted their farming operation from the first
respondent’s
farms which they occupied as well as farms that
they each individually owned in their own right. They had each
received livestock
from the estate of their late father. They had
each used the assets of the first respondent that happened to be on
the properties
that they occupied to their own benefit. They also
appeared to be tied to each other by the liabilities of the first
respondent.
65.
Neither accounted to the other or the first
respondent. It is evident that second respondent realised that the
only way he could
extricate himself from this situation was to first
deal with the liabilities of the first respondent. On the undisputed
evidence
before the court he in fact did this.
66.
Each brother was in breach of their respective
fiduciary duties to the first respondent. Each of them may in fact be
guilty of a
number of offences under corporate law. For present
purposes neither of these questions, has any relevance. It is clear
that neither
of them showed any regard for the separate corporate
identity of the first respondent and its governance structures.
67.
In this context, the only reasonable inference
that can be drawn is that both applicant and second respondent
intended to farm for
their own account. That as a matter of fact they
were farming for their own account albeit that they were both using
and/or abusing
certain assets of the first respondent in doing so. In
my view the farming operations of the first respondent, as a matter
of fact
came to an end in 2004 after the death of the applicant’s
and second respondent’s father.
68.
I now turn to the third issue being the ownership
of the livestock. On this question the affidavit of the accountant
being Mr De
Wit filed and dated 14 December 2017 is relevant. Mr De
Wit shows that there is no difference in the differential between the
two
scenarios relating to the loan accounts calculated by the
referees. In paragraph 8.2.1 of his affidavit Mr De Wit puts the
position
as follows:
“
8.2.1
Whichever scenario is applied as regards the livestock, the net
difference between the parties’ respective loan
accounts
remains the same; hence the neutrality of the issue between the
applicant and the second respondent;”
69.
This affidavit was served on the applicant by way
of the Sheriff. He has not responded to it. I cannot see anything
wrong with the
position taken by Mr De Wit. As a matter of fact, this
renders the question of who owned the livestock moot in the present
circumstances.
In these circumstances it would not serve any purpose
for me to deal with any of the apparent disputes raised by the
applicant
in regard to this question. Nor, in fact, would any purpose
be served by referring this question to trial or oral evidence.
70.
The fourth issue to be considered is the issue of
the loan accounts. As has been set out above, the referees’
have made findings
and have provided figures for two separate
scenarios. The referees deal with the issues raised by the applicant
in the applicant’s
response to their first report (the main
report). They indicate that they allocated a debit to the applicant’s
loan account
where he could not supply substantiating documents
and/or vouchers to show the exact nature of the relevant expense.
71.
In the context where these disputes have been
raging back and forth for 10 years or so, it is reasonable to expect
that the applicant
would take care to preserve appropriate records to
validate his business expense claims. Applicant could not supply
these supporting
vouchers to the referees, in these circumstances it
is appropriate that they should allocate the relevant expense as a
debit to
his loan account. No doubt the same applied to the second
respondent.
72.
More to the point, in this context, if applicant
could not supply the referees with acceptable evidence to show the
business nature
of the disputed expenses, he will surely not have
evidence such as to satisfy this court as to business nature of the
disputed
expenses. No supporting vouchers were placed before the
court which would show a factual basis for a real dispute of fact. In
the
present papers, applicant did not even contend that such
supporting vouchers existed or that he could trace them and place
them
before the court if this question was referred to trial. In
these circumstances, I cannot find that there is I real dispute of
fact that I would be justified in referring to trial or to oral
evidence.
73.
It is evident in reading the second respondent’s
answering affidavit together with the allocation of debits against
his loan
account that referees made a number of important debit
allocations to his loan account that he probably still doesn’t
agree
with, yet he has accepted the methodology and the result
achieved by the referees despite this.
74.
In my view, the referees have actually made a
finding of fact in relation to the calculation of the said loan
accounts. This is
especially so in the context of what Mr De Wit has
demonstrated. In these circumstances I find that the recommendation
that made
by the referees in their main report and their
supplementary report that the matter be referred to trial is
inappropriate, and
I shall decline to implement such recommendations.
75.
In regard to the valuation of the first
respondent’s farms, the referees’ have obtained the
services of an independent
land valuator who has filed his reports.
The findings of the said valuator are binding on the referees in
terms of the original
order made by my sister Pakati J in appointing
the referees. In any event, neither the applicant nor the second
respondent has
raised any issues with these valuations.
76.
The second respondent has made certain proposals
for the practical implementation of the findings of the referees to
achieve an
equitable and fair solution in the circumstances. These
proposals have been approved by the referees.
77.
On the evidence before me I find that the
livestock was owned by the partnerships as claimed by the second
respondent. In any event,
and on the opinion of Mr De Wit this
scenario would be the most beneficial to both applicant and second
respondent from a tax perspective.
78.
The proposals made by the second respondent have
been refined by Mr De Wit to make the entire exercise both tax
compliant and tax
efficient. In broad strokes the order that I will
make will: cater for the transfer of the properties belonging to the
first respondent
that second respondent now occupies and farms to the
second respondent upon transfer of the second respondent’s
shares in
the first respondent to applicant; cater for capital gains
and other taxes; equalise the respective loan accounts in the first
respondent; provide for the amounts applicant will have to pay to
achieve this either by payment, or sale of certain of his assets;
will provide for the payment of the referees fees and disbursements;
and will leave applicant with all the shares in the first
respondent
in which the first respondent’s properties which he occupies
and farms are housed.
79.
The second respondent is not seeking costs
against the applicant and having regard to the history of the matter
and the context
it is appropriate that save for orders relating to
costs already made each party shall bear their own costs.
In
the circumstances, the following order is made:
1.
Subject to paragraphs 3 to 7 below:
1.1.
The report of the Referees, Messrs Pieter Hendrik
Strydom and Tony Wright [“the Referees”] dated 15
December 2015 (with
valuations annexed thereto)(“the Main
Report”), and
1.2.
The Supplementary Report of the Referees dated 8
December 2016 (“the Supplementary Report”);
(collectively
referred to as “the Report) are wholly adopted and made an
order of court.
2.
There shall be an order of costs in favour of the
Referees as follows:
2.1.
The order shall be in favour of each referee in
regard to their own fees;
2.2.
The fees and disbursements of each referee shall
be borne in equal shares by Applicant and Second Respondent, and
shall be enforceable
against Applicant and Second Respondent as to
50% each;
2.3.
Each referee shall draw up invoices for Applicant
and Second Respondent separately, reflecting;
2.3.1.
One half of the total fees and disbursements
payable, less;
2.3.2.
Any amounts paid by that party previously;
2.4.
Each party shall – within 5 court days of
the presentment of each invoice to him – indicate whether he
requires same
to be taxed. Should he do so, the taxing master shall
tax the amounts upon the basis that they are disbursements to expert
witnesses,
and affix thereto his allocatur;
2.5.
Each party shall pay the amount to the referees
within one month of presentation of invoice, or – should the
fees proceed
to taxation – within one week of allocatur,
together with interest at the rate of 9% per annum;
2.6.
The provisions of paragraph 5.2 below shall
comprise a mechanism for receiving payment of the referees’
fees and disbursements,
and shall not derogate from any of the rights
accorded by this paragraph.
3.
As regards the issue left open for determination
by the referees as to the date upon which the farming operations in
the name of
the First Respondent ceased (such dispute identified by
the Referees in the final sentence of paragraph 22.1 of the Main
Report,
and left open by them in paragraph 44 of the Main Report), it
is directed that:
3.1.
The first respondent ceased trading operations on
24 January 2004;
3.2.
To the extent that the partnerships known as “Van
Zyl en Seuns” and “Van Zyl en Seuns Namibia”
subsisted
as at this date, that these partnerships terminated on 24
January 2004 (being the date of passing of the late Frederick Jacobus
van Zyl {Snr});
3.3.
That – subsequent to 24 January 2004 –
Applicant and Second Respondent traded in their own names and for
their own profit
and loss.
4.
As regards the status of the loan accounts
between the parties, it is directed for the purposes of this order
that the division
and distribution of assets referred to below shall
– as regards the loan accounts of the Applicant and Second
Respondent
– proceed on the basis that:
4.1.
Applicant is found to be indebted to the First
Respondent in the sum of R3,652,020.80 (three million six hundred and
fifty-two thousand
and twenty rand and eighty cents);
4.2.
First Respondent is found to be indebted to
Second Respondent in the sum of R4,175,386.22 (four million one
hundred and seventy-five
thousand three hundred and eighty-six rand
and twenty-two cents);
as
found by the referees in paragraph 112 of the Main Report.
5.
Applicant and Second Respondent are directed –
in order to implement the recommendations contained in paragraphs
130, 132
to 133 inclusive of the Main Report – to take such
steps and sign such documentation (whether personally, or as
directors
of the First Respondent) in order to give effect to the
following:
5.1.
Applicant shall be liable to pay Second
Respondent the sum of R4,013,703.51 (four million and thirteen
thousand seven hundred and
three rand and fifty-one cents){“the
loan equalisation amount”} comprising:
5.1.1.
One half of the difference between their
respective loan accounts in the first respondent, determined upon the
basis referred to
in paragraph 4 above, plus:
5.1.2.
The additional sum of R100,000.00 (one hundred
thousand rand), representing one half of the difference in value
between the farms
to be transferred to Second Respondent (on the one
hand);
5.1.3.
and the farms retained by Applicant/First
Respondent (on the other hand);
together
with interest thereon at the prescribed rate with effect from the
date of this order to date of satisfaction thereof.
5.2.
In the event that within three months of the date
of this order,
5.2.1.
Applicant fails to pay this amount to Second
Respondent or;
5.2.2.
Applicant fails to pay any portion of the cost to
the Referees (provided that same is then payable);
Then:
5.2.3.
The sheriff shall be authorised to sell one or
both of the farms De Brak and/or Nielersdrift 182 owned by First
Respondent. The
farm to be sold is to be nominated by the Applicant
within five days of a written request by Second Respondent or the
Referee/s
or – failing such nomination – chosen by the
sheriff such as to realise the unpaid amount of the referees’
fees
and disbursements, as also the unpaid amount of the loan account
equalisation amount.
5.2.4.
The sheriff shall pay, from the proceeds of this
sale:
5.2.4.1.
R4,013,703.51 (four million thirteen thousand
seven hundred and three rand and fifty-one cents) to second
respondent (on behalf
of the applicant in order to discharge his debt
to second respondent) together with interest thereon at the
prescribed rate with
effect from the date of this order to the date
of payment;
5.2.4.2.
To the referees, such sum as may be owed to them
by the applicant;
5.2.4.3.
The balance, if any, to the first respondent.
5.3.
First respondent will transfer the Waterval group
of farms to second respondent or his nominee together with any
movables on the
farms that first respondent may still own.
5.4.
Second respondent must, on registration of the
Waterval group of farms into his name or into the name of his
nominee:
5.4.1.
Transfer his shares in first respondent to
applicant at par value;
5.4.2.
Resign as a director of first respondent.
5.5.
As regards taxation:
5.5.1.
First respondent will pay SARS any taxes which
arise from the transfer contemplated in paragraph 5.3 above;
5.5.2.
Provided that second respondent has received the
amount referred to in paragraph 5.1 above, he will refund first
respondent the
aforesaid tax.
6.
All parties shall do such things and sign such
documents as may be necessary to give effect to this order. In the
event of the failure
or refusal of a party to do so, the Sheriff of
the High Court is hereby authorised to take such steps, and to sign
all documents
as may be necessary on behalf of the party in default
in order to give effect to this order.
7.
Save for any costs order already made, each party
shall bear their own legal costs relating to this matter.
Lawrence
Lever
Acting
Judge
Northern
Cape Provincial Division
Legal
Representation:
Applicant:
In
person
Second
Respondent:
Adv.
S.C. Kirk-Cohen SC oio Duncan & Rothman
Date
of Hearing:
9 February 2018
Date
of Judgment :
28 September 2018
Date
Judgment Delivered:
26 October 2018
[1]
2013 (3) SA 360 (GSJ).
[2]
Wright’s case, above at paras [15], [16] and [18].
[3]
Wright v Wright
2015 (1) SA 262
(SCA).